DCIT CC 35, MUMBAI V. ROMEN M PATEL, MUMBAI

ITA 4869/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59882 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-02-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 11-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Search and seizure; Peak credit
• Section: 143(3); 133(6); 68; 145; 132

Judgement Text

16THSHRI ROMEN M PATEL ITA NO. 4869/MUM/2010 (ASST YEAR 2002-03) IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI D DD D BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI T R SOOD T R SOOD T R SOOD T R SOOD, ,, , AM AMAM AM & & & & SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO. 4869/MUM/2010 4869/MUM/2010 4869/MUM/2010 4869/MUM/2010 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2002 2002 2002 2002- -- -03 0303 03) )) ) THE DY COMMR OF INCOME TAX CEN.CIR 35, MUMBAI VS SHRI ROMEN M PATEL PROP M/S ROYAL CORPN 51 BIBIJAN STREET, 1 ST FLOOR MUMBAI 400 020 (APPELLANT (APPELLANT (APPELLANT (APPELLANT ) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO. AABPP 3811D AABPP 3811D AABPP 3811D AABPP 3811D ASSESSEE BY SH VIMAL PUNMIYA REVENUE BY SH C G K NAIR DT.OF HEARING 22 ND FEB 2012 DT OF PRONOUNCEMENT 16 TH , MARCH 2012 ORDER ORDER ORDER ORDER PER PER PER PER VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, , , , JM JMJM JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 23.3.2010 OF THE CIT(A) FOR THE ASSESSMENT YEAR 2002-03. 2 THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GR OUNDS IN THIS APPEAL: 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE AO WAS NOT JUSTIFI ED IN REJECTING THE BOOKS OF ACCOUNTS ON THE BASIS OF VERIFICATION OF TWO PAR TIES ONLY, OUT OF WHICH ONE PARTY WAS NOT VERIFIABLE AT THE GIVEN ADDRESS 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS IGNORED THE FACTS THAT BOOKS OF ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR DURING THE REMAND REPORT PROCEEDINGS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT ALL THE PURCHASES AND SALES ARE VERIFIABLE AND SHRI ROMEN M PATEL ITA NO. 4869/MUM/2010 (ASST YEAR 2002-03) 2 PARTIES ARE AVAILABLE ON THE GIVEN ADDRESS ON THE B ASIS OF VERIFICATION OF TWO PARTIES ONLY OUT OF WHICH ONE PARTY WAS NOT TRA CEABLE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT SALES/PURCHA SES WERE NOT VERIFIABLE 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT DURING THE C OURSE OF SEARCH AND SEIZURE OPERATION IT WAS FOUND THAT THE ASSESSEE WA S ENGAGED IN THE BUSINESS OF DISCOUNTING OF CHEQUES/DRAFTS AND ALMOS T ALL THE DEPOSITS IN THE BANKS ARE FOLLOWED BY SIMILAR AMOUNT OF WITHDRA WAL IN CASH. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE UNDER TH E PROVISIONS OF SECTION 68 OF PEAK CREDIT FOUND CREDITED IN THE BANK ACCOUN TS IGNORING THE FACT THAT ASSESSEE FAILED TO PROVE THE GENUINENESS OF TH E ENTRIES FOUND CREDITED IN THE BANK ACCOUNTS AND NON FURNISHING OF THE DETA ILS RELATING TO CASH TRANSACTIONS. 3 BRIEF RELEVANT FACTS EMERGING FROM THE RECORD AR E AS UNDER: 3.1 THE ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF M/S ROYAL CORPORATION WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN TOOL S, HARDWARE AND GENERAL ITEMS. THE ASSESSEE HAS ALSO DECLARED INCOME UNDER THE HEA D INCOME FROM OTHER SOURCES. THERE WAS A SEARCH AND SEIZURE ACTION U/ S 132 OF THE ACT ON 11.4.2002 IN THE CASE OF THE ASSESSEE. THE RECORDS SEIZED DU RING THE COURSE OF SEARCH REVEALS THAT THE ASSESSEE ALONG WITH FAMILY MEMBERS WERE ENGAGED IN THE BUSINESS OF DISCOUNTING OF CHEQUES/DRAFT AND WERE RUNNING A TOOL AND NUTS BUSINESS. 3.2 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, TH E ASSESSEE FILED RETURN OF INCOME ON 31.10.2002 ALONG WITH AUDIT REPORT. THE ASSESSING OFFICER ASKED THE ASSESSEE TO SUBMIT THE DETAILS OF ALL THE PURCHASE AND SALES ALONG WITH THE ADDRESSES OF THE CONCERNED PARTIES. THE ASSESSEE VI DE LETTER DATED 17.2.2005 SUBMITTED THE LIST OF ADDRESSES OF SALES AND PURCHA SE PARTIES WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER AT PAGE 2 & 4 O F THE ASSESSMENT ORDER. TO SHRI ROMEN M PATEL ITA NO. 4869/MUM/2010 (ASST YEAR 2002-03) 3 VERIFY THE TRANSACTIONS, THE ASSESSING OFFICER DEPU TED THE INCOME TAX INSPECTOR TO SERVE NOTICES U/S 133(6) OF FIVE PARTIES NAMELY: I) SH MOHANLAL M PATEL - VICTOR ENTERPRISE S II) SHRI PANKAJ M PATEL PERFECT TOOLS C ORPN III) SHRI ROMEN M PATEL ROYAL CORPORATIO N IV) SMT SARJU PANJAJ PATEL SARASWATI TRADING CORPORATION V) SMT KOKHILABEN M PATEL KRISHNA ENTERPRISES . 3.4 AFTER CONSIDERING THE REPORT OF THE INCOME TAX INSPECTOR, THE ASSESSING OFFICER OBSERVED THAT THE ONLY AUTHENTICATED DOCUM ENT FILED BY THE ASSESSEE ARE THE BANK ACCOUNTS OF THE ASSESSEE IN WHICH THE DEPO SITS ARE THROUGH CLEARING AND WITHDRAWALS ARE THROUGH CASH. THE ASSESSING OF FICER OBSERVED THAT SINCE ALL DEPOSITS ARE FOLLOWED BY SIMILAR AMOUNTS OF WITHDRA WAL IN CASH; THEREFORE, IN THE ABSENCE OF EXPLANATION, THE PEAK DEPOSITS IN THE AC COUNTS OF VARIOUS BANKS ARE TAKEN AS CASH CREDITS U/S 68 AND ADDED TO THE INCOM E OF THE ASSESSEE. 3.5 ON APPEAL, THE CIT(A) ISSUED A REMAND ORDER AN D AFTER CONSIDERING THE REMAND REPORT, HELD THAT THE PURCHASE AND SALES ARE VERIFIABLE AND THE PARTIES ARE AVAILABLE AT THE GIVEN ADDRESS; THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND MAKING THE A DDITION OF RS. 17,60,964/- U/S 68 OF THE I T ACT, 4 BEFORE US, THE LD DR HAS SUBMITTED THAT THE INCOM E TAX INSPECTOR VISITED AT THE GIVEN ADDRESS OF THE PARTIES BUT THE PARTIES WERE NOT FOUND AT THE GIVEN ADDRESS; THEREFORE, THE TRANSACTIONS OF SALE AND PU RCHASES WERE NOT VERIFIABLE AS THE PARTIES WERE NOT TRACEABLE. DURING THE SEARCH A ND SEIZURE OPERATION, IT WAS FOUND THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF DISCOUNTING OF CHEQUES AND DRAFTS AND THEREFORE, THE PEAK DEPOSITS IN THE BANK WAS RIGHTLY ADDED BY THE ASSESSING OFFICER U/S 68 OF THE I T ACT. THE ASSES SEE HAS FAILED TO PROVE THE SHRI ROMEN M PATEL ITA NO. 4869/MUM/2010 (ASST YEAR 2002-03) 4 CREDIT IN THE BOOKS OF ACCOUNT AND FAILED TO FURNIS H THE DETAILS RELATING TO THE CASH TRANSACTIONS. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 4.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT THE ASSESSING OFFICER MADE THE ADDITION ON THE BASIS OF THE REPORT OF THE INCOME TAX INSPECTOR WHEREAS DURING THE REMAND PROCEEDINGS, IT WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT M/S PARESH BEARING CO RPORATION AND PARESH & CO WITH WHOM THE ASSESSEE WAS HAVING TRANSACTIONS, ARE AVAILABLE AT THE GIVEN ADDRESS AND WAS READY TO GIVE THE DETAILS OF TRANSA CTIONS. THE LD AR HAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER ISSUED SUMMONS TO THE OTHER PARTIES, WHO HAVE COMPLIED WITH THE SUMMONS BY PRODUCING THE BOO KS OF ACCOUNT AND SHOWING THE TRANSACTIONS RECORDED IN THE BOOKS OF A CCOUNT. THEREFORE, THE SALE AND PURCHASE TRANSACTIONS WERE NOT FOUND BOGUS. HE HAS FURTHER POINTED THAT IN RESPECT OF M/S PARESH BEARING CORPORATION, WHOSE AD DRESS WAS GIVEN BY THE ASSESSEE WAS 72/79 NAGDEVI CROSS LANE, THE SAID PAR TY STILL EXISTS AT THE SAME ADDRESS BUT THE INCOME TAX INSPECTOR HAD GONE TO A WRONG ADDRESS AT 72/72 AND THEREAFTER 72/84 AND NOT AT 72/79. THIS FACT C AN BE CLEARLY ASCERTAINED FROM THE RECORDS AND PARTICULARLY FROM THE REPORT OF THE INCOME TAX INSPECTOR. 4.2 THE LD AR HAS FURTHER SUBMITTED THAT AS REGARDS K K CORPORATION, THE ASSESSEE AT THE OUTSET STATED THAT THERE HAS BEEN N IL PURCHASES FROM THIS PARTY DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THE RE IS NO QUESTION OF FURTHER RECORDS OR EXPLANATION ON THE PART OF THE ASSESSEE ONCE THIS FACT WAS DISCLOSED THAT THE ASSESSEE HAS NEVER AT ANY POINT OF TIME DU RING THE RELEVANT YEAR DEALT WITH THIS PARTY OR DOING ANY BUSINESS WHATSOEVER TH E NATURE. THE LD AR HAS DRAWN OUR ATTENTION TO THE FACT THAT FOR THE AYS 2 003-04 AND 2004-05 AS WELL AS 1997-98 TO 2001-02 NO ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON THIS SHRI ROMEN M PATEL ITA NO. 4869/MUM/2010 (ASST YEAR 2002-03) 5 ACCOUNT AND PARTICULARLY FOR THE ASSESSMENT YEAR 2 003-04 AND 2004-05 WHEN THE ASSESSMENT WAS COMPLETED U/S 143(3). THE LD AR HAS FORCEFULLY CONTENDED THAT THE ASSESSEE FILED ALL THE RELEVANT RECORDS DU RING THE REMAND PROCEEDINGS INCLUDING THE COPY OF THE PURCHASE BILL WHICH ARE S UPPORTED BY THE BOOKS OF ACCOUNT. THEREFORE, NON AVAILABILITY OF ONE PARTY AT THE GIVEN ADDRESS CANNOT BE A REASON FOR TREATING THE ENTIRE PURCHASE AND SALE TRANSACTION AS BOGUS AND REJECTING THE BOOKS OF ACCOUNT. THE ASSESSEE HAS D ULY EXPLAINED THE SOURCE OF DEPOSITS IN THE BANK BY DISCLOSING THE IDENTITY OF THE PARTIES AND CREDIT WORTHINESS. 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL A S THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER MADE THE ADDITION AS THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE PURCHASE AND SALE. TH E ASSESSING OFFICER ALSO REJECTED THE BOOKS OF ACCOUNT AND TOOK THE PEAK DEP OSITS IN THE BANK FOR THE ADDITION U/S 68 BY RELYING THE INCOME TAX INSPECTOR S REPORT. 5.1 IT APPEARS, AS CLEAR FROM THE RECORDS THAT THE INCOME TAX INSPECTOR VISITED TO THE WRONG ADDRESS AND REPORTED THE NON AVAILABIL ITY OF THE PARTY. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER ISSUED SUMMONS T O THREE PARTIES NAMELY; (I) DIWAN SONS; (II) MANSI INDUSTRIAL WORKS AND (III) S WASTIK FASTNERS WHO WERE DULY RECEIVED THE SUMMONS AND COMPLIED WITH BY PRODUCING THE BOOKS OF ACCOUNT AND SHOWING THE TRANSACTIONS WITH THE ASSESSEE AS R ECORDED IN THE BOOKS OF ACCOUNT. THUS, WHEN THE TRANSACTIONS WITH OTHER PAR TIES WERE FOUND AS GENUINE, THEN THE ADDITION FOR PEAK DEPOSIT CANNOT BE JUSTIF IED MERELY ON THE BASIS OF THE INSPECTORS REPORT REGARDING NON AVAILABILITY OF SO ME OF THE PARTIES. FURTHER, THE ASSESSEE PRODUCED THE RELEVANT RECORDS DURING THE R EMAND PROCEEDINGS AND AS PER THE REMAND REPORT, M/S PARESH BEARING CORPORATI ON AND PARESH & CO WERE SHRI ROMEN M PATEL ITA NO. 4869/MUM/2010 (ASST YEAR 2002-03) 6 FOUND EXISTS AT THE GIVEN ADDRESS WHEN THE INSPECTO R VISITED THE SITE. THE ASSESSING OFFICER HAS ALSO RECORDED IN THE REPORT T HAT THE PARTIES WERE READY TO GIVE INFORMATION FOR VERIFICATION AS AND WHEN DEMAN DED. THUS, EVEN AS PER THE REMAND REPORT WHEN THE PARTIES WERE FOUND EXIST A ND READY TO COOPERATE WITH THE INSPECTOR TO SHOW THE RECORDS FOR VERIFICATION, THEN THE ACTION OF THE ASSESSING OFFICER IS NOT JUSTIFIED ON THE BASIS OF THE INSPECTORS REPORT. THE CIT(A), AFTER CONSIDERING THE REMAND REPORT HAS CON CLUDED THE ISSUE IN PARA 1.19 AS UNDER: 1.19 I HAVE CONSIDERED THE REMAND REPORT OF THE A SSESSING OFFICER AND THE REPLY OF THE APPELLANT. THE ASSESSING OFFICER H AS MADE ADDITION IN THE INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE INCO ME TAX ACT ON THE BASIS OF INSPECTORS REPORT DATED 17.02.2005, BUT T HE ASSESSING OFFICER VIDE HIS REMAND REPORT DATED 22.02.2010 HAS INFORME D THAT MIS. PARESH BEARING CORPORATION AND MIS. PARESH & CO. WITH WHOM THE APPELLANT WAS HAVING TRANSACTIONS ARE AVAILABLE ON THE GIVEN ADDR ESS AND WAS READY TO GIVE THE DETAILS OF TRANSACTION FOR AY. 2002-03, IN VIEW OF THE REMAND REPORT OF THE ASSESSING OFFICER, IT IS CLEAR THAT A LL THE PURCHASE AND SALES ARE VERIFIABLE AND PARTIES ARE AVAILABLE ON GIVEN A DDRESS, THEREFORE THE ASSESSING OFFICER IS NOT JUSTIFIED IN REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT UNDER SECTION 145 OF THE INCOME TAX ACT A ND MAKING ADDITION OF RS 17,60,964/- UNDER SECTION 68 OF THE INCOME TAX A CT EVEN OTHERWISE, PROVISIONS OF SECTION 68 IS NOT APPLICABLE IN THE C ASE OF THE APPELLANT AS THE SOURCE OF DEPOSIT IN BANK ACCOUNT ARE EXPLAINED AS REPRODUCED IN PARA-1 14 OF THIS ORDER. AS THE AMOUNT HAS BEEN CRE DITED FROM THE PARTIES WHOSE IDENTITY AND CREDITWORTHINESS IS PROVED. THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE AUDITED BY THE CHARTERED ACCOUNT UNDER SECTION 44AB AND NO DEFECTS HAS BEEN POINTED OUT. THE ASSESSING OFFICER HAS ALSO NOT GIVEN ANY ADVERSE COMMENTS IN THE REMAND REPORT IN THIS REGARD. IN VIEW OF THIS FACT, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.17,60,964/- MADE BY HIM. THE GROUNDS OF APPEAL N O. I AND 2 ARE ALLOWED. 6 IT IS CLEAR FROM THE FACTS AND CIRCUMSTANCES OF T HE CASE AS DISCUSSED ABOVE THAT THE PURCHASE AND SALE TRANSACTIONS ARE VERIFIA BLE AND WHEN NO PURCHASE OR SALE WAS MADE WITH K K CORPORATION AND BY MISTAKE, THE NAME OF K K CORPORATION HAS MENTIONED IN THE DETAILS GIVEN BY THE ASSESSEE, THEN AFTER COMING TO KNOW THIS FACT, THE ACTION OF THE ASSESSING OFFICER IS N OT SUSTAINABLE. SHRI ROMEN M PATEL ITA NO. 4869/MUM/2010 (ASST YEAR 2002-03) 7 7 IT IS PERTINENT TO NOTE THAT WHEN NO ADDITION WAS MADE BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT U/S 143(3) FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 AS WELL AS RETURN OF INCOME WAS ACCEPTED FOR THE ASSESSMENT YEAR 1997-98 TO 2001-02 WITHOUT ANY ADDI TION, THEN IN THE ABSENCE OF ANY MATERIAL TO SHOW OR ESTABLISH THAT THE TRANS ACTIONS ARE NOT GENUINE, THE SAME CANNOT BE DOUBTED FOR THE ASSESSMENT YEAR UNDE R CONSIDERATION. THE PLEA OF THE REVENUE THAT THE ASSESSEE AND OTHER FAMILY M EMBERS WERE DOING CHEQUE DISCOUNTING BUSINESS IS NOT RELEVANT AS THE ASSESSI NG OFFICER HIMSELF HAS NOT MADE ANY ADDITION ON THIS ACCOUNT. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE CIT(A) IN D ELETING THE ADDITION AND THE SAME IS UPHELD. 8 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED ON THIS ORDER PRONOUNCED ON THIS ORDER PRONOUNCED ON THIS ORDER PRONOUNCED ON THIS 16 1616 16 TH THTH TH , ,, , DAY OF DAY OF DAY OF DAY OF MAR MAR MAR MAR 2012 2012 2012 2012 SD/ SD/ SD/ SD/ SD/ SD/ SD/ SD/ ( (( ( T R SOOD T R SOOD T R SOOD T R SOOD ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 16 TH , MAR 2012 RAJ* RAJ* RAJ* RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI